First-Time Home Buyer Guide

The first step is pulling your credit and getting a true affordability number — before touring any house. Aim for a 740+ FICO, a 36% or lower debt-to-income ratio, and a written pre-approval letter from a lender. The single biggest reason first-time buyers overpay is starting the search before the numbers are set.

For a $400,000 home in 2026, plan for roughly $40,000–$75,000 in total cash: $24K–$40K down payment (6–10%), $8K–$20K in closing costs (2–5% of price), and $8K–$15K in post-close liquid reserves. FHA, VA, and state first-time-buyer programs can lower the down payment, but never the reserves.

A 620 FICO is the practical floor for a conventional mortgage; 580 for FHA. The best rates start at 740 and improve through 800. A 40-point credit swing on a $400,000 30-year loan is roughly $90 per month — about $32,000 over the life of the loan.

A common rule is that your total monthly housing cost — principal, interest, taxes, insurance, and PMI — should stay at or below 28% of gross monthly income. Add maintenance and replacement reserves (1–3% of home value per year) and total housing costs should not exceed 33–36% of gross income. Most lenders will approve you for more; that ceiling is not the target.

PITI stands for principal, interest, taxes, and insurance — the four components of a standard mortgage payment. It is the floor of your true monthly housing cost, not the ceiling. Add PMI (if your down payment is under 20%), HOA dues, maintenance reserves, and replacement reserves to get the all-in number.

Pre-qualified is a soft estimate based on numbers you tell the lender. Pre-approved is a written commitment from an underwriter after they verify your income, assets, credit, and debts. Sellers in competitive markets only entertain offers from pre-approved buyers.

Yes — almost always. A standard inspection costs $400–$700 and takes 3–4 hours, and it is the only structured walk-through of a property's major systems you will get before signing. On any home over 25 years old, add radon, termite, and sewer scope inspections.

Closing costs are one-time fees paid at the close of escrow — lender origination, title insurance, escrow, attorney, recording, transfer taxes, and prepaid items like the first year of homeowners insurance and several months of property taxes. They typically run 2–5% of the purchase price; on a $400,000 home that is $8,000–$20,000.

Private mortgage insurance is required on most conventional loans when the down payment is under 20%. It typically costs 0.3–1.5% of the loan amount annually — roughly $1,000–$5,000 per year on a $400,000 home. You can avoid it with a 20% down payment, request its removal at 20% equity, or use a VA loan, which has no PMI.

The five most common mistakes are: shopping before pre-approval, treating the lender's max as the target, waiving the inspection contingency in a hot market, forgetting closing costs and reserves in the cash budget, and underestimating year-1 ownership costs like property-tax reassessment and insurance inflation. All five are avoidable with the right pre-purchase checklist.

From pre-approval to closed deal, plan on 60–120 days. Pre-approval takes 1–2 weeks, search and offer typically 30–60 days, inspection and appraisal 14–21 days, and the underwriting-to-funding window is 21–35 days after an accepted offer. In competitive markets the search alone can take 6 months or more.

Re-key every exterior lock, locate and label the main water and gas shutoffs and electrical panel, transfer utilities, set up homeowners insurance autopay, file the homestead exemption where available, change all HVAC filters, test smoke and CO detectors, and open a dedicated home reserve account. These steps prevent the most common year-1 emergencies.